Product design is all the rage in poverty alleviation, and has been for the past few years. By applying the principles of lean manufacturing and waste minimization to the challenge of designing products for people living on less than a dollar a day, we can now create stripped-down products at a fraction of the cost. But product design is only one small component of the process. The two other challenges in bringing these products to market – financing and distribution – are just as critical to solve.
There are plenty of companies and organizations that are trying to develop great products at a very low cost. Cookstove companies are racing to the bottom, trying to engineer alternatives to inefficient clay stoves at the lowest possible price. The Engines and Energy Conversion Laboratory at Colorado State University partnered with Envirofit, a manufacturer of clean cookstoves, to design the most efficient-burning stove possible. Dozens of solar companies offer lanterns, water heaters, radios, and mobile phone charging stations. These off-grid energy products provide an energy source to the billions of people living without access to electricity. In just about every industry, from sanitation to transportation, companies are redefining low-cost manufacturing.
Unfortunately, building the products is only part of the solution. Actually getting those products out to the customers, many of whom live in remote rural areas, can be a challenge. Similarly, creating a viable financing solution that allows for payment in installments is going to be more difficult when most customers do not have a bank account, let alone a credit card. Fortunately, technology is changing the game in a fundamental way, bringing solutions to these problems that most people never dreamed could be possible. And one company, in particular, represents a great example of how companies are leveraging the technology boom in low-infrastructure countries (H/T to Jon Evans for the term).
Re:Char is a company based in Western Kenya that sells “climate kilns” to convert biomass to biochar. To deal with the financing problem, it is using crowdsourced, peer-to-peer lending via mobile money to provide a source of credit to its customers. And to solve the distribution problem, the company built a “shop-in-a-box” – essentially a 20-foot shipping container with a laser cutter and 3-D printing apparatus – to bring the manufacturing process close to home.
When I was living in Nairobi, I met some folks from Kiva who were piloting a super-secret initiative called “Kiva Zip.” They were experimenting with the possibility of allowing lending directly to borrowers (as opposed to through microfinance institutions, which is how most business is conducted). The ubiquity of M-PESA, the mobile money platform in Kenya, made it possible to send money to people in the most remote parts of the country for a small fee per transaction. Kiva Zip needed partners on the ground that could pre-vet certain borrowers and provide a steady stream of investments. These partners ultimately became known as “trustees,” and Re:Char became one of the first organizations to sign up.
Today you can go online and lend $25 to a Re:Char customer. In this loan, Helen of Makokha Farm lives in Bulimbo, Kenya. She needs $100 to buy a biochar kiln and additional inputs. Four Kiva members each lent $25 to Helen to fulfill the loan. Those four individuals used PayPal, an online payment platform, to transfer the money to Kiva. Kiva then transferred the money to a bank account in Nairobi, where it was then added to an M-PESA (mobile money) account. The $100 was then transferred to Helen’s M-PESA account. She received an update on her phone telling her that the money had arrived, and she went to the local M-PESA agent to withdraw the funds. She (likely) then used those funds to buy biochar kiln from Re:Char. And, today, she is in the process of paying them back over the course of the next year.
Kiva Zip is an experimental program and there is certainly no guarantee that it will be successful. Of the seven $100 loans Re:Char has endorsed, only one is currently paying on-time. This is the danger of doing direct lending without a physical presence on the ground to ensure timely payment. But, to me, this is less significant than the broad implications something like Kiva Zip has for the financing of small purchases around the world. If the Kiva Zip pilot fails, Kiva will learn and adapt. But the rubicon of direct-lending through the Internet and mobile money has been crossed. This is a great example of utilizing technology to solve the problem of financing.
In the next post, I will talk about Re:Char’s “shop in a box” and the implications it has for manufacturing and distribution in low-infrastructure countries.
Develop Economies’ Music Recommendation
Josh, good post. I’m also very interested in Kiva’s experiment. I blogged a bit about them last year, only to learn that another organization called Zidisha (https://www.zidisha.org/) is already doing something very similar. They’ve got great repayment rates, and their platform has an interesting addition in that it allows lenders and borrowers to send messages to one another. I ended up blogging a bit about them – links below. Thought you might be interested.
Thanks Dave – what do you think of unsecured lending without the social pressure element? And what is keeping you busy these days? I’m supposed to meet with another dev blogger next week (Tom Murphy – View from the Cave). We will toast a beer to you. Hope all is well in Nairobi
Low cost rural vehicle made for the African farmers. Made in arusha Tanzania